BRASILIA, Jan 5 (Reuters) - Brazilian President Dilma Rousseff is analyzing changes to pension, tax and labor laws that would stimulate the economy without relaxing her austerity drive, a government official with knowledge of the matter told Reuters.
The official, who requested anonymity to speak freely, said the government was also considering additional measures, all designed to reduce business costs and bolster investment, but declined to give further details.
“The country needs stimulus measures, but without incurring into fiscal costs,” said the official. “We are not going to give more tax breaks or cheap credit. We are not going to use the past model.”
Facing the worst recession in at least 25 years, Rousseff is under pressure from her Workers’ Party and labor unions to jump-start the economy with the fiscal benefits and subsidized credit that eroded the country’s finances during her term between 2011 and 2014.
After a series of public disagreements over the pace of austerity, Rousseff replaced fiscal hawk Joaquim Levy for leftist economist Nelson Barbosa as finance minister.
However, Rousseff has vowed to continue with Levy’s plans to raise taxes and cut expenses to rebalance the overdrawn public accounts and regain the trust of investors in Latin America’s biggest economy.
That fiscal adjustment is opposed by many of Rousseff’s allies in a rebellious Congress that is expected to decide on her impeachment in March. Municipal elections later this year are also raising pressure for her government to spend more.
Data is likely to show the Brazilian economy contracted nearly 4 percent in 2015 as a massive corruption scandal at state-run oil company Petrobras and the deepening political stalemate zapped business confidence, economists said.
Economists expect the economy to contract yet again in 2016, in the first back-to-back annual declines since the Great Depression of the 1930s. (Reporting by Alonso Soto; Editing by Lisa Von Ahn)